Partners will pay 40 percent less for subscription licenses for the latest version of Microsoft's on-demand CRM software

Microsoft plans to reduce the price its partners will pay for its newest customer relationship management software, code-named Titan, the company's latest foray into SaaS (software as a service) CRM.

Microsoft has enrolled partners throughout the world to sell Titan, whose formal name is Microsoft Dynamics CRM 4.0. Those partners will pay 40 percent less for subscription licenses for the on-demand version, the company plans to announce on Tuesday at Convergence 2007, Microsoft's European customer conference for its Dynamics business applications.

Partners will now pay 40 percent less than they're paying for the previous version of the software, Dynamics 3.0. Those charges vary by country and currency, said Mark Corley, senior director of Microsoft's CRM channel strategy.

Partners pay licensing fees to Microsoft based on the number of seats they've installed for their clients, said Bryan Nielson, director of worldwide product marketing for Dynamics CRM.

"We give the software up front, and they pay us per use per month based on actual usage," Nielson said. "They are only paying for what they use."

CRM pricing models vary, but some software vendors require their partners to pay up front regardless of how many seats they sell, Nielson said. But the 40 percent price drop for partners doesn't mean that end-customers will see a commensurate saving.

Partners will have the power to set their own pricing. "The drop in cost to partners should theoretically allow partners to reduce the price to customers," said a Microsoft spokeswoman.

An executive with a Microsoft CRM partner in Europe, who wished to remain anonymous, said Microsoft's previous prices had been a bit high, but a lower price should help hosted CRM become a more attractive options for smaller companies with lesser IT funds.

Some businesses liked that Microsoft CRM is delivered through familiar products such as Outlook, but were concerned about configuration difficulties, he said. "Hopefully, going forward with version four, there will be a product that will not only compete on price but can be configured and managed through the partner network," he said.

Dynamics CRM 4.0 was supposed to be released around June or July, but Nielson said it will be released by year end. In general, Titan delivers customer-relationship information through applications such as Microsoft's Outlook e-mail program, the Internet Explorer browser, or its Office productivity suite.

Microsoft is offering three versions of Titan, all of which are variations on the same code base. It's offering a SaaS option, where the applications and data are hosted on the partner's IT infrastructure. The partners use Titan as a base and then build specific enhancements onto the software for certain industries, such as real estate, Nielson said.

The second option is on-premise, where the CRM software and data is on the end-customer's infrastructure. The last is Dynamics CRM Live, which is SaaS but hosted on Microsoft's infrastructure. That option will only be available in North America, although Microsoft said it plans to roll it out worldwide.

The success of Salesforce.com over the last few years awoke other large software vendors such as SAP, Oracle, and Microsoft to invest in hosted offerings.

Although Microsoft is not a huge player yet in hosted CRM, the company "is taking SaaS more seriously that any of the on-premise players," wrote David Bradshaw, principal analyst for Ovum, in a recent analysis.

Part of that seriousness has been making Titan multitenant, which means that partners can host CRM applications for multiple companies on one server and one application stack. That's more profitable for partners, wrote Warren Wilson, also an Ovum analyst, in another analysis.

Also, sharing the same code base between the hosted and on-premise products saves partners from having to build multiple versions of an application, he wrote.

Microsoft has also said that Titan will support multiple currencies and languages on the same server, which wasn't possible with its previous product, Dynamics 3.0, released in December 2005, although some partners created their own multitenant versions.

All of the new features mean that "Titan will give Microsoft a potent set of capabilities in the on-demand market and position the vendor to compete much more effectively," Warren wrote.